Dividends stocks provide relatively safe returns to investors. When presented with excess cash, a company has several options. These include paying out a dividend to shareholders, reinvesting in the company, or paying off debt.
To search for a reliable, dividend-paying company, an investor should look at the dividend history. Companies should have a long track record of consistently paying out dividends on time, as well as increasing dividends over time. The downside of paying dividends is that investors will throw a fit if the dividend is reduced. Think of it like a leaky faucet. Once the water starts dripping, investors want to see the flow either remain constant or increase. If the flow decreases, chances are the company’s stock will decline.
With this in mind, here are five dividend stocks that recently increased their dividend yields.
Dividend Stocks: FedEx (FDX)
On June 14, FedEx announced that it would be raising its quarterly dividend by 53% to $1.15. The dividend yield now stands at 2.02%. FedEx will pay out the dividend on July 11 with a record date of June 27. In order to be eligible for the dividend, shareholders must own FDX stock at least one day before the ex-dividend date, which is usually one to three days before the record date. This is because the settlement of stocks is usually a two-day process.
In addition to the dividend, FedEx also announced cuts to capital spending and a review of its executive compensation program. The company will also add Amy Lane and Jim Vena to its board as part of an activist agreement with hedge fund D.E. Shaw. The fund currently manages over $106 billion in 13F assets.
The dividend payout ratio for FedEx now sits at 15.75%. This is the total amount of dividends paid out to shareholders divided by a company’s net income. In other words, it is the percentage of net income paid out to shareholders. The company now has an annualized 3-year dividend growth of 5.78%, which beats out its competitor’s average growth rate of 3.3%.
UnitedHealth Group (UNH)
On June 9, UnitedHealth announced that it would increase its quarterly dividend by 13.79% to $1.65. The company is the largest health insurance company in the U.S. and the second largest in the world. In the last 12 months, UNH has brought in $298 billion in revenue, the seventh highest among all global, public companies.
The ex-dividend date will fall on June 16, the date of record will be June 20, and the date of payment will be on June 28. UnitedHealth has a dividend increase track record of 14 years, making it an extremely reliable dividend stock. On top of that, the dividend payout ratio sits at 31.75% and the company has an impressive annualized 3-year dividend growth rate of 17.52%. However, the company’s dividend yield of 1.26% is below the average medical company’s yield of 2.69%.
Dividend Stocks: Target (TGT)
Target has had a volatile 2022 so far. Shares of TGT stock have fallen by over 35% year to date (YTD) in the face of bloated inventories, supply chain challenges and inflation. During the beginning of the year, demand was so high that shipping ports and terminals faced mass delays. Now, with inflation at 40-year highs, coupled with high gas prices and a hawkish Federal Reserve, the story has completely changed.
In the short term, Target has stated that it will see profits fall as it lowers the cost of excess inventory. Meanwhile, it will load up on “wanted” goods, such as groceries, back-to-school supplies, and household essentials. Despite these challenges, Target announced on June 9 that it would increase its quarterly dividend by 20% to $1.08.
The ex-dividend date will be on Aug. 16 and the date of record will be the next day. Investors will be able to receive their dividend on Sept. 10. Target has a dividend payout ratio of 29.85% and an annualized 3-year dividend growth rate of 7.84%. Compared to its retail competitors, Target’s annual dividend of $3.60 beats out the average figure of $2.71.
Caterpillar develops machinery and engines for a variety of industries. Last year, the company ranked as the largest manufacturer of construction equipment in the world.
Caterpillar recently announced that it would be moving its headquarters to Texas. The machinery company attributed the move to attracting more talent and improving its access to suppliers and customers. In addition, Texas has no corporate tax rate. CEO Jim Umpleby explained:
“We believe it’s in the best strategic interest of the company to make this move, which supports Caterpillar’s strategy for profitable growth as we help our customers build a better, more sustainable world.”
Still, the company cautioned that China’s zero-Covid polices would reduce near-term construction and machinery demand. Furthermore, higher input costs could threaten near-term margins. Shares of CAT stock are down less than 1% YTD, outperforming the S&P 500’s loss of 22%.
On June 8, Caterpillar announced that it would increase its quarterly dividend by 8.11% to $1.20. After the raise, the dividend yield now sits at 2.15%. The ex-dividend date will be on July 19 and the record date will occur the next day. Investors will be able to receive the dividend on Aug. 19. The company also boasts a dividend payout ratio of 37.22% and an annualized 3-year dividend growth rate of 9.07%.
Dividend Stocks: Lowe’s (LOW)
Last on the list of dividend stocks raising payouts right now is Lowe’s. During the company’s earning call, CEO Marvin Ellison stated that consumers are feeling the pressure from rising energy prices. He explained that consumers are trading up to electricity-powered tools and appliances in favor over gas-powered machinery. The company reported Q1 revenue of $23.66 billion, which fell short of analysts’ expectations of $23.76 billion. Lowe’s attributed the revenue miss to cold spring weather as customers bought less grills, patio furniture and other outdoor supplies. Still, Ellison remains confident in his company:
“I’m not saying the macro environment does not matter. I’m saying that for home improvement we are not seeing any material impact.”
The Q1 revenue miss didn’t stop Lowe’s from increasing its quarterly dividend on May 27. The ex-dividend date falls on July 19, with the record date occurring the next day. Investors will receive the dividend on Aug. 3.
The dividend increased by 31.25% to $1.05. Furthermore, the company now carries a dividend yield of 1.8% and a dividend payout ratio of 26.08%. Lowe’s annual dividend of $3.20 also trumps its retail competitors’ average annual dividend of $2.71.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.